Finance Desk, Delhi Magazine: One of the crucial aspects of financial planning is reducing the cost of your finances. In most cases, the high-interest rates levied on loans consume the major portion of income earned, leaving much less for expenses and savings. Consequently, achieving financial motives like emergency funds, retirement savings, or investments becomes tough.
The easiest way to solve all these problems is to reduce the cost of your finances resulting in better cash flow and more scope for financial decisions. Reduced cost of finances also provides solid financial security. There are many ways in which you can reduce the cost of your finances. One such way is a gold loan balance transfer.
What is a Gold Loan?
A gold loan is a type of secured loan where the borrower uses their domestic gold articles to get a loan. The process of getting a gold loan is comparatively quicker and easier than any other traditional loan. The gold loan also gives the borrower a chance to use their gold articles and ornaments as collateral putting the asset to use at its maximum potential.
As gold articles are utilised as collateral, gold loans are easy to get approved even for individuals with low credit scores. The quick and easy disbursal process of gold loans, with flexible repayment and low-interest rates, makes it a convenient choice for instant funds. The current market value of gold provided as collateral determines the loan amount.
Key Features of Gold Loans
The key features of gold loans are –
- Fast Process: As gold loans are secured by physical gold articles, the institutions will allow you to apply for loans easily. The security provided through gold gives the lenders an option to sell off the gold article and recover their money in case the borrower becomes a defaulter. Therefore, the loan amount is disbursed instantly in gold loans.
- Lower Interest Rate: The rate of interest levied on secured gold loans are comparatively lower than on unsecured personal loans. The risk taken by the lender is less and therefore the interest charged is also less. The interest rate on gold loans is generally 13% while that on personal loans is 15% or above.
- No Processing Fees: Generally, none or negligible amount of processing fees are charged by the institutions offering gold loans.
- No Documentation: Lenders do not carry a lengthy documentation process in the case of gold loans. They do not ask for documents like income proof as the loan is secured with gold collateral.
- CIBIL Score: To avail of a personal loan it is important to have a high CIBIL score but in the case of a gold loan, the CIBIL score of the borrower is not considered. CIBIL score depicts the repaying capacity and pattern of the borrower. Institutions approving the gold loan do not have to worry about repayment because, in case of default, the institution can sell off the gold and recover its money.
What is a Gold Loan Balance Transfer?
Gold loan balance transfer is a process that helps individuals reduce their cost of finance. In simple words, when an individual takes a gold loan from an institution, the rate of interest charged can be very high. In such a situation, you can find an alternate institution offering gold loans at a comparatively lower interest rate, and then use the facility of gold loan balance transfer.
In this process, the borrower opts for a gold loan transfer from one bank to another offering a lower interest rate to save up money on payable interest. The process of gold loan balance transfer is easy and can be completed without the hassle of full loan repayment. This feature is significantly beneficial for individuals who are looking for ways to reduce their financial burden.
Anyone who has borrowed loans against gold should consider the option of a gold loan balance transfer. Generally, individuals who take up loans during emergencies do not get the chance to compare with various institutions, which can land them up with high-interest rates. Such individuals can easily find alternate institutions later to ease their financial burden.
Benefits of Gold Loan Balance Transfer
If you choose the feature of a gold loan balance transfer, you can enjoy the following benefits –
- Lower Interest Rate: The feature of gold loan balance transfer gives you the option to switch to an institution offering a lower interest rate. You can save up a significant amount on the EMIs and can invest the saved-up amount for better financial security.
- PAN India Presence: The gold loan balance transfer facility is available in PAN India. The region or state of any individual can not act as a barrier to using this feature.
- Fast Process: The balance transfer process is easy and fast. It requires minimum documentation along with no eligibility criteria.
Tips to Reduce Finance Costs
- Apply for a shorter loan tenure: Generally, people choose loans with longer tenure of gold loan to reduce the EMI amounts. However, in longer tenures of gold loans, the interest is accounted for a larger period and therefore the individual ends up paying more money as interest.
- Try to prepay or part-pay loans: In most cases, lenders do not charge prepayment or foreclosure charges during a gold loan transfer from one bank to another. It is better to pay off portions of the principal amounts of the loan whenever possible to reduce the EMI amounts.
- Compare before choosing: Always compare the interest rates of all institutions before choosing your lender. A comparison of different interest rates ensures low finance costs.
A gold loan balance transfer is one of the most effective and efficient solutions to reduce financial costs. It helps individuals choose the best lender and switch at the borrower’s convenience. With minimal documentation and a quick process, this feature is beneficial for the borrower to reduce loan costs in the best way possible.